Two-Cent Doughnuts Breed Decades Of Bad Blood: It's Not So Easy Going From Free To Paid

from the tough-to-shake-it dept

One of the things we regularly hear from people who are apparently allergic to any business model that leverages free to make more money elsewhere, is that content creators have to change their business model, stop giving stuff away for free, and start charging. This is seen in lots of places, including the mad dash by many newspapers to try putting up paywalls on their news. We've long argued that doing so can really piss off readers, not just because of the cost, but because taking something that was once free and making it now cost money often changes how people look at the product itself.

The folks over at Planet Money have yet another brilliant podcast where they give an amazing example of this, showing how the impact can be incredibly long lasting as well. It's the story of why so many US veterans hate the Red Cross. Apparently, for a period of time during World War II, the Red Cross stopped giving doughnuts away to service members for free, and started charging $0.02 per doughnut. And, to this day -- seventy years later, many WWII veterans (and many who came after them) have a distaste for the Red Cross, and nothing will shake it.

The whole podcast is worth listening to, as it actually explains why the Red Cross did this (apparently, it didn't want to, but officials put pressure on them when the US entered WWII, because Allied soldiers paid for their snacks, and were annoyed that the Americans were getting free doughnuts). And for decades now, the Red Cross has tried to make up for this -- often showing up at places where veterans are with tons of free doughnuts -- but to little avail.

The program works through a few theories on why this simple change has resulted in so much animosity. They conclude that it was much more than just a "price" change, but a "category change."

Chalk it up to something called categorical change, says Uri Simonsohn, a University of Pennsylvania business professor. Price changes, people can adjust to. But this was different.

"Imagine, for Thanksgiving, you go to your parents' for dinner and after a nice dinner they say, 'That's going to be $10 per person,' " Simonsohn says. "You would be upset."

The problem isn't the price — $10 for a good turkey dinner might not be such a bad deal — but that you're being charged in the first place. It changes the relationship. For the veterans, the Red Cross went from being a little like Mom, to being the corner store

That is, these are things that people, inherently, don't think they should be charged for. Switching those things from free to fee isn't just about the price, but about the concept itself. Now, some will argue that this doesn't necessarily apply to things like newspaper paywalls, since people are already used to paying for newspapers. But, I do wonder if that's really true -- especially for the younger generation. They're not defining a newspaper website as a newspaper website, but rather as "information online." And, to them, that information is free. Period. It's going to be pretty damn difficult to get over that "category shift."

For some reason, this reminds me very much of the stuff Krugrman writes about downward wage rigidity (sometimes called "sticky wages").

There are just some sorts of things that pure abstract theoretical free-market economic modeling says should be easy, but which turn out to be very, very hard due to human psychology. I guess they are both just examples of that, maybe?

Paywalls

I think even a sign-up wall changes the category. Wen you are used to just clicking through, not really caring who the real-estate belongs to, and you are required to sign-up for a free or other account, the whole process comes to a grinding halt. I for one would have to need that information very badly to take time to register, let alone pay. There is always another, free/open source, and it is just a click or 2 down the information highway

When my local newspaper began to charge for online content, I quit visiting their website and have never looked back. I also canceled my home-delivery subscription. I'm quite sure I haven't missed anything of value.

With all the datamining and the like, it is very rare, if ever I would consider registering much less paying for news on the internet. It's just available too many places to have to put up with any BS over it.

If the newpapers don't like it, put up a paywall and watch how fast the eyeball prints disappear. Other than local news, there is nothing on the net I want that either I can't find elsewhere or if it's a paywall, I didn't need to read that bad.

Some of the sites allow you to read the first page but not the second. When I hit that, I don't return and I don't stay. News like music is no longer worth the money being demanded to see.

Another is registration to comment. If I have to register to provide the site with commentary that will increase it's worth, it's not worth it to me to give up that privacy. Torrentfreak is a fine example of a site I used to read and comment at and now just read the articles since Discus is now the middleman for comments. I'll discuss the articles somewhere else and Torrentfreak doesn't get the benefit of that.

Competing with free

(For some reason my previous comment disappeared.)
I think this actually goes nicely with the idea that if a company can't compete with free, it can't compete at all. When a company sees its product going to consumers for free, it believes that it can't compete because it doesn't see revenue from that particular product anymore; it doesn't realize that it needs to adapt and monetize through other channels because its main product, by being free of charge, is now in a different market category in some senses.

Re:

A friend of mine that people will always pay for journalism. They'll either support the papers directly or they'll just have to pay indirectly through higher taxes for greater corruption.

Do you know what's been going down at the local zoning board meeting? Do you know what your mayor is doing? Maybe they're going to put a freeway right through your house and you'll miss the meetings when you can go to protest.

I have no sympathy for you. You could have supported a local paper but you're being so darn snotty about it.

Sorry, but people will pay for news

This is part of your attempt to rationalize why you support paywalls for Louis CK and Kevin Smith, but you can't bring yourself to support a major media paywall. (For an organization that works with its union, pays for health care, contributes to a pension...)

But face it. Advertising sucks and its rate of return is getting suckier. Even Big Search can't make it work as people are paying less and less for the ads.

So something is going to pay for it and no amount of singing kumbaya with your fans is going to do it.

And news is much different from doughnuts during WWII. The doughnuts were an act of charity and 2 cents didn't even pay for their real cost. When those veterans came home, they quickly got with the program. They either coughed up the real cost of the doughnuts or the bakery went out of business.

The same is true for newspapers. If the kids don't pay for journalism, they'll get nothing. No charity drive is going to bring back the Rocky Mountain News or any of the papers that are gone. The kids can cop any attitude they want, but it's not going to make magic things happen.

Hard to draw an analogy between the Red Cross (serving people in a time of crisis) and the entertainment industry.
Honestly, as someone who paid nothing for their college education, I was strongly opposed to raising fees for following generations dramatically, and having student loans leave young people with a mountain of debt before they've done a day of work. But now it's basically accepted.

my local paper had a headline yesterday: "Teen reported missing in ". I click on it with good intentions, thinking there's a small chance but if I see him/her I could call police. But instead of seeing the picture, I'm greeted with "your free trial of has ended, please subscribe". So in effect, a system akin to the "Amber Alert" can't even make it past the almighty paywall.

Re:

I think the analogy is fine because beyond their normal activities, the Red Cross didn't have to serve those donuts. When they started charging for them, though, that bred some ill will.
I don't think the analogy with your education works, though, because while you may be personally opposed to increasing tuition fees, (leaving aside the subsidy of public universities through taxes) it's the current students who are paying for it, and they usually only need to pay for four years anyway, so they seem to be more pliant about it anyway. These veterans though were being served donuts through their service and beyond...until the price increased from zero.

Re: Re: Paywalls

... said the two registered users. I realize the significant difference between a signup requirement and the clear option of equally functional anonymity presented by Techdirt, but the great irony of your sentiments in spite of the clear influence of CWF+RTB was too much not to point out.

Re:

Re:

I used to give my smallest rocks to my new customers since I knew they would be back for more. It's pretty easy to tell once they're hooked... you can see it in their eyes and thats when the dough starts to roll in. I really approach it as a business. You need to have customers throughout the lifecycle. Some just gettin hooked. Others who think it's cool, the daily crew all the way down to the ones you barter with (I keep the really cut shit for them). Can't wait for Facebook to start charging $29.99 per month. All you addicts will have to make a decision then. Do I feed my children or give them a FB account No wrong answer in my book.

Re: Sorry, but people will pay for news

This is part of your attempt to rationalize why you support paywalls for Louis CK and Kevin Smith, but you can't bring yourself to support a major media paywall.

Did you even stop for a moment to think about the exclusivity of delivery? I don't know about you, but I usually find jokes funnier when delivered by the competent comedian. In contrast, I couldn't care less where the news specifically came from since my confidence in such information is less dependent on the individual source and more dependent on my own heuristics and meta-analysis. To sum up, news is more reliable from multiple independent sources (which in text links make easy to quickly determine), whereas comedy is less reliable upon delivery in the same context. As soon as comedians figure out how to tell each others jokes, while citing each other, and remain funny, this will change; the logical conclusion of this is captured well by the present shift in the field of journalism.

Re: Sorry, but people will pay for news

Re: Re: Re: Paywalls

This is somewhat different. Think about the value Techdirt adds to your experience. Firstly, you get to see articles if you pay a small amount (Mike, still waiting on new books to give more money for!).

Second, you have a chance to have other people respect your opinion a little more. Sure, some people can have anonymous posts and they take advantage of it. But how many people take all anonymous posts seriously? While we have a number of people that have good points to make (anonymous or otherwise) we have a fair number of trolls that come in to spout off their nonsense of the day. But Mike doesn't charge for those details and that's the fairly awesome part. He allows you to make your own choice. Do you want to be a contributor? Do you want to just have a sign in to track your posts? Do you just want to rant? All is at your fingertips with very little in regards to an emotional cost.

The other good thing is that the news for technology is pretty damn good. So if I decide to use this for my own news show, I don't have to worry about Techdirt trying to say I stole their news. Think about this. Techdirt is the new press and he's made it damn easy for others to relate issues on obscure aspects of technology and constitutional issues.

So it's great that Techdirt does this. I'm more than happy to try to give what I can in time or money to a site that respects all of their contributors (yes, even the trolls that try to detract from the conversation) far more than trying to pigeonhole people that aren't paying them.

Re: Sorry, but people will pay for news

Re: Re:

bob, here's the thing. I know quite a few people who have stopped reading the news altogether. I read news from several sources so I can get some of the bias out. I've asked why they stopped and the responses I get kind of fit with "who cares what the zoning board is doing", "the mayor can do what he/she wants", "they have to notify me before taking my house", "that's just what THEY want me to know". Seems that people don't care anymore. Protesting does nothing. People have learned that our officials don't care what they think, they just take it. The only papers who can stay afloat have to bend stories to fit the prevailing politics of the area. Point is, firewalls, registration, money doesn't matter; no one believes the stories anymore. Got a solution for that?

Re: Re: Sorry, but people will pay for news

Re: Sorry, but people will pay for news

A lot of people don't want to pay for news anymore because they've figured out that it's already been paid for. Kids don't pay for journalism, corporations do. If they don't think they'd be caught, it would probably be cash in the office. Journalism is just as corrupt as anything else; cash on the barrelhead. Left, right, it's been bought. Why would anyone pay for that?

More than anything, this story gives credence to the idea that piracy would cause more long term harm that can be imagined. At this point, an entire generation has grown up thinking music is free to download. Taken away, they don't say "oh well, the party is over" instead they get pissed off at the record labels for having the balls to actually charge for the product (as they did before).

Once you kill the market, you kill it. Congrats to everyone for their hard work.

Old King, Two Sons

Old king was dying, he couldn't decide between his sons
who should rule. Instead he gave one son the job of handing out
punishment to the people and the other to give rewards.
With the rule they had to switch roles every year.
At the end of the first year when the nice king started punishing people the townspeople went to the good king and said.
We love you nice king! Your brother was nice and now he acts
cruel. Can you get rid of him for us?

I always thought the point was.
People just won't accept nice to mean.
Apparently, it does not compute.

What I find odd is what is the Red Cross doing provisioning belligerents? I thought they were supposed to be a humanitarian and transnational organization and not supporting militarism or nationalism.

Anyways, my pet peeve against the Red Cross is their history of trademark bullying against people using crosses to represent first aid kits or hospitals. I'm not aware of anything else that can be well rendered in a 8x8 sprite that conveys the meaning 'medical' as well as that.

Then again, some of the fault must lie with the trademark office for not revoking it due to being a genericised trademark (something which the trademark office is notorious for not doing).

Two-Cent Doughnuts Breed Decades Of Bad Blood

40 years ago, my ex worked for a man who had been a manager with the Red Cross during the war and we asked about this.
He said that the change had been due to a Pentagon ruling, passed down because the International Red Cross was not an American organization.
I suspect the decision may have also been related to the question of provisioning combatants, so that Red Cross access to prison camps might not be compromised.

The Red Cross hating started long before WWII

My family still has stories from World War I. And plenty more from WWII. Plus the class distinction barrier didn't help either. And the disrespect that they showed toward wounded servicemen was not tolerated at all.

The Red Cross used to do some good things, but as the article mentioned, they changed models. They could have stood up for principles, but they didn't.

Every article worth reading on charitable giving that I've seen has recommended taking a look at the percentage of donations that actually make it to the intended recipients. The Red Cross has always been somewhere in the neighborhood of 50%. That's a lot of overhead.

If you really want your donations to be effective, then you have to look at the religious sponsored organizations. Last I checked, the Big Three are Catholic Relief Services http://crs.org/ (Catholic Charities in the USA), Lutheran World Relief http://lwr.org/ and Mennonite Relief http://www.mcc.org/. Again, last I checked, they all averaged about 97% of donations going directly to its intended purpose - overhead is very low. If those don't fit your world-view, then ask at your own church, or start your own that can hit a 2.5% overhead rate. Feel free. Then you can complain about what a terrible job these three are doing.

Now Red Cross fills a very important function - they are usually the first to arrive after a disaster, but after a week or two, the other three groups are in there providing longer term support. And Red Cross leaves. But being ready to be there first carries some overhead cost, and that does justify SOME of the extra overhead. I'm not ready to absolve them of greed quite yet, though. Let's give it another hundred years and see how they are doing, shall we?

Oh, and two cents wasn't a discounted price for a doughnut during WWII. During the Depression, farmhand wages were a dollar a week, if cash was involved at all. Let's see, today, that would be a $10 doughnut for a trucker making that mythical $50,000 a year that I see on certain semis. How much do you pay for doughnuts?

Re:

The comment thing is very important and often under-rated or worse, misunderstood.

A lot of websites seem to think that forcing people to register to comment somehow improves the quality of the comments. Well, maybe those websites need to have a look at youtube.

Anyway, I'll focus mostly on the advantages of letting people comment anonymously and without having to register:

- It's way more private when you don't have to register.
One comment here and there won't say much about who you really are, but once somebody can click on your user name and see everything you have ever posted, it becomes a lot easier to find out your real identity (I should know, I do this often for fun and I rarely fail!)
Of course there's always the fact that the website where you comment can save your IP address, but there are alternatives to that: sharing your network with others, using a public network or a neighbor's wifi, using TOR, using a prox or VPN, etc.

I'm not going to post without concern for my privacy when I have no idea what my comments may be used for in the future nor how long they will be stored. Who knows, maybe in 50 years something legal that I post online today will make me go to jail =/

- Registering is a pain.
You often need to provide an e-mail address. You often need to click a confirmation link they send you by e-mail. You need to type a captcha (and if it's the Google captchas, I can only read 1 out of 10 of these and many people have the same complaint). You need to spend 5 minutes finding a user name that isn't completely stupid and isn't already taken by somebody else... It might be worth the hassle when it's a website you want to visit regularly, but it's a pain when you're just stumbling on an article randomly and just feel like posting something insightful this one time.

- It filters out specific types of users and makes discussions biased.
People who care about privacy won't register and thus won't comment. That's a problem when you have an article about privacy, since those who support it the most will be absent from the discussion. Registering also attracts the opposite kind of users: those people who WANT to register so that they can collect "likes" or followers and basically feel like they're getting attention. They're usually idiots who have a popularity complex and they rarely add anything to the discussion; in fact they often repeat what 10 people have already said before them.
Forcing registration can really bias your comment section and even hurt it's quality.

- Finally, registering doesn't work.
It doesn't keep conversations civil. It doesn't root out the idiots who post nothing constructive or insightful. it just doesn't add anything to the quality of the website, so why would I, as a user (and not an attention whore) even want to bother registering so that I can post there?
Maybe if the admins really god rid of all the morons that post on their website I'd be happy to register. But banning people for being stupid isn't popular with admins apparently.

Re:

> At this point, an entire generation has grown up thinking music is free to download.

Music was free to listen since before the Internet existed. You just had to tune your radio. Entire generations grew up knowing music was free to listen and record, this just shifted to the nascent Internet as soon as it was fast enough.

Re: Sorry, but people will pay for news

Dude, enough! Nobody pays for news. We never have. Why do you try and reinvent the past? The nightly TV news has ALWAYS been free. ALWAYS. The 50 cents you throw into a newspaper box pays for the distribution, not the journalists' salaries. It has been this way for a 100 years.

Re: Old King, Two Sons

On a related note, I read a paper that looked at all 4 combinations: start nice stay nice, start nice turn mean, start mean stay mean, start mean turn nice. They found that the combination that made people like you the most was the last one. If you are a dick, then soften up, please like you more than if you are just nice all the time. That is why when you meet a cute girl, you should be aloof.

Right off the bat, the "management expense" ignores the $1,461,838 in salaries it paid out. If you look further at their 2011 return, you see the magic of accounting, where
-Advertising and promotion $ 184,856
-Travel and vehicle expenses $ 292,594
-Licenses, memberships, and dues $ 67,641
-Office supplies and expenses $ 163,810
-Professional and consulting fees $ 39,550
-Education and training for staff and volunteers $ 29,602
all count as "expenditures on charitable programs".

Give me a break. You want to do something good, volunteer in your community. But don't think that the majority of the $100 you send to a charity goes to those in need.

Re:

Not exactly a bait n switch. Bait n switch would be here is this great product on sale at a fantastic price, then when you get to the store they tell you, sorry, we are all out but here is this slightly more expensive model at a great price too. They bait you with one item and then switch the product entirely to a different one.

This is more like the drug dealer tactic...pstt, here, give this a try...i'll even give it to you for free. Once you are hooked on the product they start charging you for it.

Re:

More than anything, this story gives credence to the idea that DEMOCRACY would cause more long term harm that can be imagined. At this point, an entire generation has grown up thinking PEOPLE ARE free. Taken away, they don't say "oh well, the party is over, LONG LIVE THE KING" instead they get pissed off at the MONARCHY for having the balls to DEMAND THAT PEOPLE FOLLOW THEIR RULES(as they did before DISCOVERING AMERICA).

Once you kill the MONARCHY, you kill it. Congrats to everyone for their hard work...

Re:

You don't think that it being World War II, where soldiers needed all the help they could get, soldiers were less likely to appreciate suddenly getting gouged for food rations?

Funny how you shills work. We're in the middle of another recession with some European countries almost completely screwed over and your priority is to demand money for IP-related stuff. You have no sense of priority aside from what benefits copyright holders.

Re: Re: Re: Paywalls

In the case of registering (and even giving money to) TechDirt, there is a huge emotional difference. When I first started commenting here, I did not register. Then I developed a relationship with the site, and my registration is an acknowledgement of that.

If TD had required registration, even free registration, to comment, then I would not have commented in the first place, and I would not have developed a relationship with the site. That's what I mean when I say "distance".

Re:

"At this point, an entire generation has grown up thinking music is free to download"

They don't think it, they know it and studies also show that those who pirate the most also, as it happens, buy the most. Apart from cd sales, the music industry is expanding, but only the real hardcore pirates and aged relatives buy cd's anymore.